How does cash injection post-acquisition affect the cap table?

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February 20, 2021

by a searcher from Harvard University - Harvard Business School in Vancouver, BC, Canada

Suppose I close a deal, and a year into operation, need additional cash for capex or opex. If my investors supply the cash, will the equity split be recalculated accordingly? What if I inject the cash or get a bank loan? I'm trying to understand what happens to the cap table in these different scenarios.

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Reply by a searcher
from The University of Chicago in Chicago, IL, USA
The business should be valued quarterly. If additional cash is injected, it'd be valued as an investment in the company at that time. However, it should be written in you LPA ahead of the deal how additional investments will be treated, as well as the valuation methodology.
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Reply by a searcher
from Harvard University in Omaha, NE, USA
This will likely depend on the operating agreement that you negotiate and set with your investors from the outset.
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